Financial services providers (FSPs) in EMEA are expected to spend $46.2 billion on IT services in 2005, however less than 30 percent of FSPs will outsource any strategic projects by the end of 2006, according to Gartner.

?Most FSPs currently use outsourcing tactically to augment staff for faster project turnaround or to reduce operational costs, rather than for strategic value,? says Kimberly Harris-Ferrante, research vice-president at Gartner.

?FSPs should now begin outsourcing strategic projects in order to gain larger-scale, enterprise-wide value.?

?Strategic projects have different dimensions than normal, tactical projects,? Harris-Ferrante adds.

?They are more complex in that they focus on blending the use of IT outsourcing and business process outsourcing to enhance and transform the organization. The nature of the project requires a different structure of contracts, relationship model and metrics.?

For outsourcing projects to be successful, outsourcing must be considered strategic, and it needs to be part of the corporate culture. The company must embrace its use and develop strategies on when and how to use outsourcing effectively.

?Outsourcing success is based on risk mitigation, so FSPs must build a strong strategy to facilitate the use of outsourcing for strategic projects,? Harris-Ferrante says.

?FSPs should develop strategies that stipulate how and when outsourcing should be used across the enterprise. Then, proper governance of the outsourcing projects should be established by designating and empowering leadership of the outsourcing project.?

To gain maximum benefit from outsourcing, FSPs must fully understand the opportunities and challenges associated with IT outsourcing and business process outsourcing. FSPs should know: when to use outsourcing; how to use outsourcing tactically and strategically; what the best types of projects and processes are to outsource; how to balance onshore, nearshore and offshore alternatives; and how to select the best sourcing partner based on project scope, pricing model, risk tolerance and business outcome.